When you file bankruptcy, your bankruptcy attorney will discuss the pros and cons of filing bankruptcy. Because each person’s financial situation is different, the pros and cons of filing bankruptcy for one person is often slightly different when compared with another person. While there are some distinct advantages and disadvantages of filing bankruptcy that are the same in every case, your situation will dictate whether there are any issues that must be addressed prior to making a final decision about filing bankruptcy. One issue that can limit your options is paying back family members before filing bankruptcy.
Travis J. Richards has the knowledge and expertise in bankruptcy law to help you make a decision about whether filing bankruptcy is the best way to resolve your debt problem. You can schedule a free bankruptcy consultation by calling 609-267-5297.
Paying Back a Family Member Prior to Filing Bankruptcy
In many cases, when a family has money problems another family member will loan that person money to help them as they recover from a financial crisis. It is only natural for that person to choose to pay back the family member over other creditors such as finance companies and credit card companies. Unfortunately, if you pay back a family member within one year of filing bankruptcy, this could create an issue for your family member.
Bankruptcy Code Section 547(b) gives the bankruptcy trustee the power to “avoid” or recover preferential payments to insider creditors made prior to the bankruptcy filing. If the creditor is an insider, the bankruptcy trustee can recover any payments to that person made within one year of the bankruptcy filing. Insiders include family members, business partners, friends, and business entities owned by the debtor.
The theory behind allowing the trustee to avoid preferential payments is to maintain a “fair” distribution to all creditors regardless of their relationship to the debtor. For example, it would be unfair for a debtor to choose to pay his family member $1,000 while he ignores the debts he owes to his other creditors.
Preferential payments to family members often cause a problem for the debtor because he or she does not want the family member to suffer financially because the debtor chose to pay back a debt. In many cases, it was an innocent choice made prior to the debtor consulting with a bankruptcy attorney; however, it can delay the filing of the bankruptcy in some cases. It is important to discuss any payments to family members during your free bankruptcy consultation so that we can devise a strategy for solving your debt problem while protecting your family member.
Contact an Experienced Mount Holly Bankruptcy Attorney
Personal Approach, Professional Service, Affordable Payment Plans
The Law Office of Travis J. Richards, LLC is a full-service Mount Holly bankruptcy law firm focused on Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, debt consolidation, credit repair, tax liens, student loans and foreclosure. We represent clients in Burlington County and throughout South Jersey.
Contact our office at 609-267-5297 to schedule your free consultation to discuss bankruptcy and non-bankruptcy alternatives. You may also use our convenient online contact form and one of our friendly, professional staff members will contact you to answer your bankruptcy questions and/or schedule a free consultation with Travis J. Richards.
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